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National Budget Kite-Flying Festival 2011

Deaglán de Bréadún

There are so many kites flying on the Budget that we could have a national festival. The child benefit issue has really taken off since it surfaced in the Sunday papers. Meanwhile, Labour’s Willie Penrose had already quit his “super-junior” job over the closure of an Army barracks in Mullingar.

Apparently the job vacated by Mr Penrose will not be filled until after the Budget, so expect a number of other Labour juniors and backbenchers to be tipping their caps for it in the interim. You are not a full minister and cannot vote but you do get to sit at Cabinet in what is humorously known as “the high chair”.

Will there be any more resignations? Possibly, but with such an enormous majority, the Government won’t be seriously endangered. The basic deal, as Ivan Yates pointed out on Newstalk just now, is that there be no increases in core rates of Social Welfare for Labour and no hike in income taxes for Fine Gael.

Besides all that, the ghost of the Troika is hammering at the door, giving the Government an excuse and rationalisation for harsh measures.

One has a growing feeling that equality is becoming more and more of an issue. The extraordinary imbalance between the salaries of top bankers, senior civil servants and others vis-a-vis the money paid to nurses, Gardaí and firefighters, for example, is coming more and more into the spotlight.

Who would argue that the work of a nurse or police officer is less socially-useful than that of a banker? Interesting times lie ahead!

I doubt anyone will notice much difference if they never filled the ‘super junior’ position and anyhow we can’t afford all these ministers.

How can Noonan credibly stand up and take money from the most vulnerable in society while doing nothing to tackle the obscene pay and pensions at senior level in the public sector. I’m a pensions adjudicator, that’s my day job, and there is nothing stopping the government capping the pensions of Cowen or Harney or the judges, or of lowering their salaries, except the will to do so.

Public service, be it as President or any other role should be at the expense of what you might earn in the private sector. Amazing you see people work in the White House for a term or two for less money than the President (no one in the US public sector earns more than the President) and then go earn their millions when they leave, yet in Ireland our public servants expect to earn their millions in the public sector before retiring early to earn more millions in the private sector while keeping their public sector pensions. It’s nuts.

Yet here we are again with the game of throwing out ‘leaks’ so as to ‘manage’ people’s expectations and play games, so they’ll be horrified at a €10 benefit cut but will be relieved when it’s only €5.

The lack of ethics among the people who make the decisions to do that sort of thing (sit at a meeting and decide what to leak) is quite disgusting really.

If Mr Noonan or this government had an ounce of integrity the first thing he would say when he stands up is to cut the salary of the President to €100k, and cut all judges at all levels by another 30% net and to announce a cap on all public sector pensions, in payment and to be paid at €60,000 – all that’s stopping him is to the will to do it.

He could also cut the salaries of all public reps by 30% too and scrap all their expenses and allowances. According to the Oireachtas, in Sept 2011 Noonan claimed €1,000 ‘ministerial rate’ per month on top of his salary through the PSA and for what we can’t see. He also claimed €4,091 per month in the last Dáil, on top of his salary and of course not just him.

Of course the so called ‘left wing’ types aren’t shy about lining their pockets with the maximum possible in expenses and not a single receipt from any of them.

Has Mr Noonan any emotional intelligence – has he completely forgotten the lessons of the way he mishandled the situation regarding the late Mrs McCole.

So he’ll stand up and allow the well off keep child benefit to pay for piano lessons or rugby while taking it from the very people who use it for what it was intended – to put food on the table.

Then he’ll allow the middle class pass the cost of 3rd level education on to those who can’t afford to attend or send their own children.

Then he’ll allow the same middle class to keep their pension tax relief and their other various saving tax reliefs which are paid for by people who don’t earn enough to have a non-state pension or savings, while the people who benefit from that tax relief are still eligible to receive the same state pension that the person who can’t afford a private or employer pension receives.

So it’s not true that the right decisions can’t be taken, anyone with half a brain could balance the budget overnight. The problem is the person with the authority to do so doesn’t have the guts to cut what needs to be cut because middle class people are not afraid to use their voice, whereas it’s far easier to take money from the vulnerable and marginalised.

I bet you Mr Noonan personally knows the names of all the people he goes to meetings with and who get access to walk the corridors of where he hangs out but I bet he doesn’t know the name of the person who cleans his office or what their employment conditions are, ie, bare minimum wage or a 12 hour shift with no pension and no sick pay or holiday pay.

Perhaps I’m a little on the thick side, but I’m unable to understand exactly why increasing income tax will damage employment – this has almost become a mantra among TDs and Ministers, but it doesn’t make sense to me.

In the late 90′s, when income tax was significantly higher than it currently is, many of those who had emigrated during the last recession returned as well as thousands of immigrants, and employment grew rapidly. The income tax base, which was basically destroyed by FF and the PDs from 2000 onwards, is clearly insufficient to support pubic spending needs. If anything is going to have a negative impact on employment, will it not be a 2% hike in VAT within a domestic economy with no growth and a retail sector that’s on its knees?

I cannot see how, ultimately, unless income tax is increased and public sector pay and social welfare decreased, the structural deficit can be permanently closed – unless there is very significant economic growth.

Then there is the issue of the projected €6bn required to service the ever growing national debt – this is almost 20% of the projected tax take – hardly sustainable, even in the short-term.

It seems to me that the Government are tinkering around the edges, rather than effecting fundamental and worthwhile changes and reforms. In my view, in the absence of a significant debt write-down and/or economic growth – neither of which appear imminent – the Government is simply postponing the inevitable and slowly poisoning the patient.

Back to the future, and parallel with the “reneging on pre-election promise strategy,” by the Kenny/Gilmore coalition, one is perplexed as to why the Irish Hierarchy (Catholic) is so strangely silent with regard to the dreadful Gilmore/Kenny decision to close Ireland’s historic Embassy to the Vatican?
Is there some sort of schism going on that we Irish Roman Catholics don’t know about??
This is the worst decision ever made in the history of Hibernia and yet a strange silence prevails..
Now, more than ever, and not least for economic reasons, we need a strong diplomatic link with the Holy See, which has far reaching influence.

@ Peter Barrins – increasing the marginal rate will not bring in significant amounts of money. Increasing the standard rate however can disincentivise people from taking a job up if medical cards, rent allowance etc. are taken into account.

Increasing VAT while regressive brings in money from anyone transacting – social welfare, salaried employees, pensioners all pay for the increase.

I agree with Mr. Fitzgerald however, the coalition has wasted its honeymoon looking at itself in the mirror and saying how fabulous they look. It is sheer fantasy or voodoo economics to borrow GHW Bush’s phrase to think that you can only apply austerity to 30% of total government spending.

All of this is difficult. Every decision is difficult and has consequences.

I genuinely empathise with the Ministers making decisions but I work long hours and while I was lucky enough to get a hard earned bonus last year, it is not incentivising when I lose 53% of it to tax (marginal rate, social charges, prsi etc.) and people on public pensions and/or in the public sector are immune to cuts.

Incidentally, a cut to public wages hurts my household as my wife is a Principal in a mid-sized school but it is fairer on the wealth creators in our society that are working 60-70 hour weeks or more to keep the country going.

Tonight on a TV Show I listened to Richard Bruton argue with the presenter that a person earning €140K per annum would be paying an effective rate of tax in the order of 54%. Last week on the same show, I listened to his colleague, Simon Coveney making a similar point although, when challenged, he wasn’t quite as adamant as Richard Bruton.

Tonight I sat down and worked out the numbers on Excel. Taking paye, the usc and prsi as the only deductions and applying the basic tax credits and the prsi exemption, the effective tax rate on a €140K income is 44% or, to put it another way, net pay is 56% of the gross figure.

Whether this is too high or too low is one issue, but the fact that Government Ministers, and particuarly those of Richard Bruton’s calibre, are confusing marginal and effective tax rates, is worrying in view of the decisions they are making.

This current coalition is, to my mind, a heartless, soulless coalition of inexperienced, pie in the sky ideologues that is succeeding in aggravating every sector of society at every crass move. There are flesh and blood people involved in this collective’s badly thought out budget and other strategies – as one courageous/principled Willie Penrose is acutely aware.
People are not simply figures/statistics to be manoeuvred, especially by ageing ideologues whose ideology belongs on the scrapheap of failed social, political and economic revolutions.
That the coalition leaders, Gilmore & Kenny would make that dreadful decision to close one of Ireland’s oldest and most treasured missions abroad — Ireland’s Embassy to the Holy See at Rome — is indicative of the utter lack of diplomatic nous and the macabre ideology driving this coalition, in my opinion.
Heading for a car crash……….sooner the better.

@4 RPE – People working 50-70 hours per week in the private sector are the exception!

I agree that tax rates must not be such that they are a disincentive to work when compared to social welfare benefits. Presently, at minimum wage level, this is the case if a person is on social welfare plus rent supplement.

While the marginal tax rate on a bonus or income above a certain amount is over 50%, the effective tax rate on total income is less. The reality is that the USC had the most severe impact on those who were previously exempt from PRSI and income tax. For those who were not, the additional charge was small because part of the previous PRSI charge was pulled into the USC.

Unfortunately, unless unemployment decreases dramatically (and for one I hope Danny McCoy in IBEC is correct when he says it will return to 2007 levels within 2 years) those who are working will have to contribute more – at least in the short-term. There should, perhaps, be a rate of 35% for income between €35 and €70K – which is well above the social welfare rates – and 41% for income thereafter. The income tax burden should then be raised or lowered via tax credits. I also think that instead of children’s allowance, working people should receive a tax credit for each child as should those on social welfare.

In my view, increasing VAT could have a very negative impact on businesses and employment, unless rates and rents are reduced.

@6 – In recent years Ireland has turned its back on religion and particularly Catholicism – may be a good thing or not – only time will tell. As you rightly point out, however, the basic tenets of social justice would also appear to have been largely abandoned and with it the fundamental concepts of morality and ethics, contained therein. This, in my view, is not a good thing and never will be a good thing, and only time will reveal the full extent of the damage this has caused and is causing.

Irish society is going to continue paying a very high price until the people who have been elected by ‘the people’ to govern, put the lives of those people at the centre of every decision they make rather than money, banks, and bondholders, who have no duty of care whatsoever to the Irish people and are solely concerned with retrieving their funds.

Without a people centred approach, the people will be fearful and threatened, and society divided and fragmented. I cannot understand why nobody in Government can see this rapidly unfolding eventuality.